Microsoft bets on Windows 7 as sales fall

Microsoft’s profits fell for the second consecutive quarter, leaving the company hoping that Windows 7 can spur a change of fortunes.

Profits during Microsoft’s first quarter were down 18% to $3.6 billion, with sales down 14% to $12.92 billion compared to $15 billion this time in 2008.

However, Microsoft is classing $1.4 billion of this as deferred revenue from its Windows 7 upgrade program. This scheme allows people to buy a PC with Windows Vista and later install Windows 7 on the machine for free.

The company plans to include the $1.4 billion as upgrade revenue during its next quarter. Taking the deferred revenue into account Microsoft would have posted a 4% drop in revenue, to $14.4 billion.

Microsoft is hoping Windows 7 will boost sales and the fortunes of its client division, which saw the biggest revenue drop of all the divisions.

Revenues tumbled 39% over the quarter, though Microsoft’s chief operating officer, Kevin Turner, claimed the company was encourage by the “early positive response” to the operating system.

The early signs are good for the software giant, with Amazon reporting that Windows 7 is the biggest grossing pre-order product ever at Amazon.co.uk.